WK 3 MKT 571
University of Phoenix
Presently Classic Airlines is one of the largest airline carriers in the world. Last year the company had a net income of $10 million dollars on operating revenues of $8.7 billion. The year before the company had a net income of $71 million on 8.5 billion of operating revenues (Classic Airline Scenario, 2010). The net income has decreased $61 million in one year. One of the reasons for the huge decrease in net profit is because of marketing strategies. The company needs to take three stepsto turn the company around. First it needs to analyze the internal and external pressures that has created the present crisis. Second it needs to formulate a problem-solving method, and third it needs to apply the problem-solving method to the current crisis. Analyze current situation
Rising costs, particularly of fuel and labor, have limited Classic Airlines to compete for the valued frequent fliers (Classic Airline Scenario, 2010). To protect the company from possible bankruptcy, a 15% cost reduction has been implementedover the next 18 months. Each department will have cuts, with marketing hardest hit at 21.5% reduction versus sales and operations at 11.5% (Classic Airline Scenario, 2010). The following shows the cost reduction goals by department (Classic Airline Scenario, 2010). To make sure Classic Airlines does not go into bankruptcy, the marking department needs to focus on three issues. First, the internal and external pressures causing the decrease in net income needs to be identified. A plan to decrease or eliminate the identified internal and external pressures needs to be formulated. Second, the challenges of the marketing department needs to be solved. The third and final step is to formulate financial strategies by examining possible available resources and other airline's marketing solutions. Internal and external pressures
Classic Airlines is faced with many external and internal pressures. External pressures include the present consumer uncertainty about flying. After the September 11, 2001 terrorist high jacking of anAmerican commercial aircraft, every airline has suffered the worse consumer's crisis the country has ever experienced. Since the terrorist attack on airplanes, consumers have an unpleasant feeling about air safety. The travel downturn after September 11 has subsided, Classic Airlines overestimated the reversal,and expanded too quickly. That caused Classic to face a restrictive cost structure (Classic Airline Scenario, 2010). Shortly after the terrorist attack, the county entered its worse economic downturn since the Great Depression,which severely crippled the economic stability of world markets. The rising costs of fuel and labor has affected Classic Airlines ability to compete for the frequent flier. Because of increased uncertainty about flying, the economic downturn, and increased labor and fuel costs, Classic Airlines has seen a 10% decrease in share prices in the past year. Other external pressures include: fierce price cutting from competitors, negative effects of the public created low employee morale, and declining confidence of the consumers. The internal pressures includean increasingly volatile union climate and the lowest employee morale in the company's history. The financial statements including the balance sheet, income statement, and cash flow statements shows a company headed for financial disaster. Last year the net income of the company was $10 million, however;the year before the net income was $71 million, for a decrease of $61 million in one year. To counter further financial crisis the company has mandated a 15% cost reduction over the next 18 months. If the company can't meet the 15% reduction, the company faces bankruptcy (Classic Airlines Scenario, 2010). Other internal pressures include: increasing cost of labor, low margins, poor employee morale, decrease in...